Final Results

RNS Number : 7732H

Curtis Banks Group PLC

15 March 2018

 

Curtis Banks Group plc

("Curtis Banks", the "Group")

Final Results for 12 months to 31 December 2017

Curtis Banks Group plc, one of the UK's leading SIPP providers, is pleased to announce its final results for the 12 months to 31 December 2017 in line with the audited accounts available on the Group's website.

Highlights

·     Operating revenue increased by 47% to £43.6m (2016: £29.7m)

·     Adjusted operating profit¹ increased by 51% to £10.7m (2016: £7.1m)

·     Adjusted operating margin increased to 25% (2016: 24%)

·     Profit before tax increased by 31% to £5.9m

·     Adjusted diluted EPS increased by 48% to 15.38p

·     Strong gross organic growth in own SIPP numbers of 14% with total administered now 76,474

·     Assets under administration increased by 21% to £24.7bn

·     Proposed final dividend of 4.75p (2016: 3p) making a full year payment of 6.25p (2016: 4p)

Highlights and key performance indicators for the year include:

Financial	2017	2016
Operating Revenue	£43.6m	£29.7m
Adjusted Operating Profit	£10.7m	£7.1m
Profit before Tax	£5.9m	£4.5m
Adjusted Operating Margin	25%	24%
Basic EPS	9.75p	7.23p
Diluted EPS	9.26p	7.02p
	2017	2016
Basic EPS on Adjusted Operating Profit less an effective tax rate	16.20p	10.67p
Diluted EPS on Adjusted Operating Profit less an effective tax rate	15.38p	10.37p
Operational Highlights
Number of SIPPs Administered	76,474	72,983
Assets under Administration	£24.7bn	£20.4bn
Total organic new own SIPPs in year	8,719	6,236

^____________

¹ Profit before tax, amortisation and non- recurring costs 

Commenting on the results and prospects, Rupert Curtis, CEO of Curtis Banks, said:

"This year has been one of considerable progress for the Group with a strong increase in our operating revenues and adjusted operating profit. As a result and in accordance with our progressive dividend policy I am pleased to report a 56% proposed increase in our dividend for the year.

"We have undergone a period of consolidation following the acquisition of Suffolk Life and now have a single identity for the Group. Our new integrated Group Management Committee has built the foundations for us to operate more efficiently and to provide an even better service for our customers.

"The market opportunity for SIPP providers remains compelling. The key regulatory and demographic drivers of our organic growth persist and we are well positioned to continue our profitable growth."

Analyst Presentation:

There will be a presentation on Thursday 15 March 2018 at 9.30am for institutional investors and analysts at Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET. Those wishing to attend should contact [e-mail].

Copies of the audited accounts of the Group will be available on the Group website today.

For more information: 

Curtis Banks Group plc	www.curtisbanks.co.uk
Rupert Curtis - Chief Executive Officer	[phone]
Paul Tarran - Chief Financial Officer Will Self - Deputy Chief Executive Officer
Peel Hunt LLP (Nominated Adviser & Broker)	[phone]
Guy Wiehahn
Rishi Shah
Camarco	[phone]
Ed Gascoigne-Pees
Hazel Stevenson Jane Glover

LEI Code:  213800LYP7YTVDXRMP40

Notes to Editors:

Curtis Banks administers over 76,000 Self-Invested Pension Schemes, principally SIPPs and SSASs. The Group commenced trading in 2009 and has successfully developed, through a combination of organic growth and acquisitions, into one of the largest UK providers of these products. The Group currently employs approximately 570 staff in its head office in Bristol and regional offices in Ipswich and Dundee.

For more information - www.curtisbanks.co.uk

 

Chairman's Statement

I am pleased to present my first statement as Chairman of Curtis Banks for the year ended 31 December 2017. I would like to start by thanking my predecessor Chris Banks as previous Chairman of the Group for his contribution to the growth of the Group. Chris was a founder of the business and has been a major contributor in the growth of the business and we are delighted that he remains a strategic advisor to the business.

The year has been one of consolidation as we made the Suffolk Life business an integral part of the Curtis Banks Group and these results are our first full year results that include the full period's contribution of Suffolk Life which the Group acquired in 2016. We have enhanced our level of governance and management control, to meet the needs of the enlarged Group, and are well positioned to deliver our strategy in 2018 and thereafter. As a result of this transaction and the progress we have made in growing the rest of our business, our revenue and profitability have grown strongly compared to the prior year. 

The period under review has shown operating revenue increasing by 47% from £29.7m to £43.6m compared to the same period last year, with adjusted operating profit increasing by 51% from £7.1m to £10.7m. Fully diluted earnings per share on these results (after tax) amounted to 15.38p per share (2016 - 10.37p) and on the statutory profits after tax diluted earnings per share are 9.26p (2016 - 7.02p). This is a good set of results particularly with the high levels of regulatory focus on SIPP providers and industry changes.

Our operating margin has continued to improve over the second half of the year and now stands at 25% for the full year.  We expect to achieve further improvement in this margin in the medium term as we grow our top line and achieve operational efficiencies.

The year has seen us make substantial progress against our strategic objectives in order to ensure we realise the benefits of our acquisitions, market ourselves more efficiently and continuously look for ways to grow our revenues.  We have launched a new group wide brand and have rationalised our office locations down to three sites in Bristol, Dundee and Ipswich. As part of our focus on growing revenues we are also enhancing our property administration services across the Group.  We will continue to explore ways in which we can capture the opportunities within the SIPP administration industry and one of our major objectives for 2018 is the standardisation of our service offerings.

We announced in December that we completed our review of our operating systems and have decided to implement a material upgrade of the existing Curtis Banks operating system and to continue to use the Suffolk Life back office system. We are confident that this is the optimal solution in terms of cost, efficiency and risk.

The total number of SIPPs currently administered by the Group now exceeds 76,000 and this is as a result of continued new organic growth of all SIPPs and our attrition rates remaining stable with previous years. 

Dividends

We paid an interim dividend of 1.5p per share (2016: 1.0p per share) on 15 November 2017 and the Board proposes a final dividend of 4.75p per share (2016: 3p per share) which, if approved, will be paid to shareholders on the register at the close of business on 27 April 2018.  The shares will be marked ex-dividend on 26 April 2018 and the proposed dividend paid on 18 May 2018.  This will mean the total dividend paid in respect of the year ended 31 December 2017 will amount to 6.25p per share reflecting a 56% increase in the operating profit from the enlarged group.

Summary and outlook

During the course of this year, the Group has made considerable progress against its strategic objectives.  We have also enhanced our revenue generation capabilities and are excited about the prospects for offering enhanced property administration services across the organisation.  With a strong market position, the continued growth of the SIPP industry, excellent staff, strong relationships with high quality professional introducers and a real focus on delivering value to clients and shareholders alike the board look forward to the future with confidence.

Chris Macdonald

Chairman

14 March 2018

 

Chief Executive's Review

Operational Review

2017 has been a successful year for us and I would like to start by thanking all our staff for their hard work and dedication over the last year which has made these results possible.

The year has been one of consolidation as we made the Suffolk Life business an integral part of the Curtis Banks Group. A Group Management Committee was created in April. This team comprises talented managers from both the original Curtis Banks and Suffolk Life teams and has removed any 'silo' effect of different business entities. The team now oversees the Group and manages the changes needed to improve service for our customers and increase our operating margins. Having a team acting with a common Group purpose has already yielded results, such as standardised operating procedures and aligned risk management.

We have rationalised our office network down to three sites in Bristol, Dundee and Ipswich.  In January 2017 we closed our Chilmark office which was part of the acquisition of a book of 5,000 SIPPs in 2016. Post period end, in January 2018, we closed our Market Harborough office. 

These significant changes are the most notable part of our work towards our five strategic objectives, which everyone in the business is focused on meeting. They are: 

·  Meet changing customer needs - adapting to the changing needs of the UK population and regulatory environment to be the SIPP provider of choice.

·    Capitalise on the right opportunities for growth - Focus on profitable areas of organic market growth and selective acquisitions of well-aligned books or businesses, with a clear business identity.

·   Enhance revenue generation - extend proven revenue generation activities across the wider group and continually review fee income relative to the services provided.

·   Drive efficiency through technology - continue technology advances appropriate to the business to deliver improved margins through efficiency and improved service to customers.

·   Maintain a robust and sustainable business model - market leading governance, capitalisation and robust systems to ensure a sustainable long term business and confidence for our business partners, customers and shareholders. 

We are now taking action to build on our foundations and deliver on our strategic objectives.

We have launched a new Group brand and a single objective of growing profitably by delivering the best SIPP in the market.  There is now a common identity and culture across our Group, across all businesses and products, reflecting that all our customers can expect the same quality service-led approach that underpins our values.

SIPP Numbers and Revenues

	Full SIPPs	Mid SIPPs	eSIPPs	Total own SIPPs	Third Party Administered	Total
2017 number	20,539	24,682	22,193	67,414	9,060	76,474
2016 number	20,955	22,097	19,428	62,480	10,503	72,983
Gross organic growth rate*	3.39%	18.45%	20.22%	13.95%	0.75%	12.05%
SIPPs added organically	711	4,079	3,929	8,719	79	8,798
EPML data cleanse	-	-250	-	-250	-	-250
SIPPs lost through attrition	-1,127	-1,244	-1,164	-3,535	-1,522	-5,057
Attrition rate*	5.38%	5.63%	5.99%	5.66%	14.49%	6.93%

^*Growth and attrition percentage rate based on opening SIPP numbers at the beginning of the year

At the year end the number of SIPPs administered increased to 76,474, adding a net 3,491 schemes. 8,798 new SIPPs were added and attrition rates on own SIPPs remained stable from previous years at 5.7%.  We are grateful to our professional introducers for their continued support.

Our market and products

Customers with SIPPs invested in our 6,000 strong commercial property portfolio currently contract with third parties, who often do not have the related pension expertise, principally offering legal, management, inspection and valuation services. Extending our expertise to these services will enhance our customer proposition and diversify revenue generation.

We have formed a legal services company, Rivergate Legal Ltd, and an application has been submitted to the Solicitors Regulatory Authority for this company. In addition, we have formed a property management company, Templemead Property Solutions Ltd, and have submitted an application for RICS approval.  

The Group has also recruited a Group Sales Director, Dave Stratton, previously Head of IFA Distribution at AXA Elevate. He has commenced work on restructuring and aligning the sales teams across the Group to build on our strong organic sales figures.

We are also developing a new SIPP proposition for the Group, to deliver a single suite of products across the Group and providing enhanced functionality. This will be our organic new business proposition and will also enhance the functionality of existing products.

Regulation

Regulatory scrutiny of the SIPP market continues, but our simple business model and our scale position us well within the complex regulatory environment facing the wider industry. A recent area of focus is that of the nature of the assets within SIPPs. The Group undertakes robust due diligence on non standard investments, and the nature of the investments we are prepared to accept into SIPPs puts the Group in a strong position.

HMRC action on in specie contributions is an issue affecting our industry and the outcome and impact are not known at this stage. We do not believe that the net exposure arising from this will be material to the Group.

IT strategy

During the year we continued to review our operating systems, to ensure that they are appropriate for the enlarged Group, providing the necessary functionality to enable the Group to provide an efficient and cost effective service to both IFAs and their customers.

This review was completed in December 2017 when we concluded that the most cost effective, appropriate and lowest risk solution is to implement a material upgrade of the existing back office operating system at Curtis Banks and to continue to use the Suffolk Life back office system as well. A material consideration in reaching this decision was the additional functionality provided by a new version of the Curtis Banks operating system, which only recently became available. We believe this is an effective solution for the foreseeable future based on our current strategy.

The upgrade of the systems at Curtis Banks is expected to commence in H2 2018. Costs associated with this upgrade will be capitalised and amortised in accordance with our normal accounting policy. Amortisation will commence once the upgrade is completed and fully operational.

People and culture

Operational efficiencies have allowed us to grow the business while maintaining staff numbers, delivering a positive contribution to our operating margin.

We value our people and the positive contribution they make to our culture and the performance of our business. We continue to place emphasis on staff engagement and wellbeing and have established a structured reward and recognition scheme and an employee forum that drives engagement and communication. We have also grown our corporate social responsibility activities, promoting our presence in our local communities and increasing our support for our people's own fundraising activities.

Rupert Curtis

Chief Executive Officer

14 March 2018

 

Chief Finance Officer's review

Financial Review

Operational revenues of £43.6m in 2017 have increased by 47% over the comparable period. This is through a combination of strong organic growth and the full year effect of the acquisition of the Suffolk Life Group of Companies in May 2016.

The operational revenue contribution from the Suffolk Life group of companies accounted for £22.5m of such revenue for the year ended 31 December 2017 compared to £10.4m in the seven months ended 31 December 2016. Operational revenues for the Group in the year ended 31 December 2017 excluding Suffolk Life grew by 8.6%.

Fee revenue remains the predominant source of income for the Group with a strong emphasis on recurring annual fee income. In the year ended 31 December 2017 annual recurring fees represented 84% of the total fee income.  Fees are based on a recurring fixed monetary annual fee and a menu of additional fixed fees depending on the services provided to the SIPP. Fees are not dependent on movements in the value of underlying assets within SIPPs and as a result the income of the Group is not dependent on movements in financial markets.

Interest income remains part of Group income. In the year ended 31 December 2017 £9.5m of the Group operating revenues were from interest margin (2016 - £4.5m). The significant increase in this income from the previous year arose from the alignment in November 2016 of Suffolk Life banking systems with the virtual banking system operated at Curtis Banks. This allowed for funds to be placed on deposit with more attractive interest rates than previously. Future interest rate increases will not meaningfully impact Group operational revenue as clients will share in any uplift in bank base rate.

Administrative expenses of £32m for the Group increased by 44% compared to the previous year.  This was largely a result of a full year of costs from the Suffolk Life Group of Companies. Suffolk Life administration costs for the year ended 31 December 2017 were £16.8m compared to £8.4m for the seven month period to 31 December 2016.

Staff costs for the year totalled £21.0m compared to £15.2m for the year ended 31 December 2016. Of this increase £4.8m related to the full year effect of the acquisition of Suffolk Life. In addition staff costs have increased due to annual pay reviews related to average wage earnings and, as set out in the report of the Remuneration Committee, the introduction during the year of an Executive Bonus Scheme and Long Term incentive Plan for key members of staff, as well as a further offering of the Save as You Earn option schemes for all staff members. Whilst such measures have a financial impact their introduction results in the retention and reward of key members of staff that is necessary to grow and develop the business.

Financial Review (continued)

Staff numbers have remained relatively static at 597 as at 31 December 2017 compared to 591 as at 31 December 2016, the slight increase arising from additional staff being recruited in the final quarter of the year to cover the imminent closure of Market Harborough office in January 2018.

Integration of the Suffolk Life operations was completed during the year and a full review of costs across the Group is taking place to identify areas where further cost efficiencies can be made as well as more efficient operational processing of the day to day SIPP administration activities. The objective of this review is to accelerate our progress in rebuilding the adjusted operating margin to  30%. This will be achieved by a combination of revenue enhancements, in year cost savings and operating improvements. These will not only benefit the Group but will also enhance the level and quality of services that are being provided to clients and introducers of business. A number of these enhancements have already been actioned.

The balance sheet as at 31 December 2017 shows a strong position with shareholder net assets increasing from £41.5m to £44.6m. Shareholder cash balances at year end were £25.7m compared to £21.5m at the end of the previous year and after regulatory capital requirements are taken into account at year end there were free shareholder cash balances of circa £9m available.

In 2016 the Group borrowed £23m for the acquisition of Suffolk Life. This comprised a £15m term loan repayable over 5 years and a revolving credit facility of £8m. Interest on this debt accrues at the rate of 2.25% plus LIBOR. The debt continues to be repaid in line with scheduled terms and the covenants required by the bank in respect of this gearing are well covered. As at year end the Group had net shareholder cash (after debt) of £8.1m (2016: £0.5m).

Suffolk Life Annuities

Part of the Suffolk Life Group of Companies, Suffolk Life Annuities Limited, is an insurance company that writes SIPP Products as insurance contracts. These are all non-participating insurance policy contracts and so the Group does not bear any insurance risk. As the policyholder assets and liabilities are shown on the balance sheet of Suffolk Life Annuities Limited, these also show on the Group balance sheet on consolidation. As the policies are non-participating contracts, the Client related assets and liabilities in Suffolk Life Annuities match. In addition the revenues, expenses and investment returns of the non-participating insurance policy contracts are shown in the consolidated statement of comprehensive income. Again, these income, expense items and investment returns due to the policy holders are completely matched. The acquisition was accounted for in accordance with IFRS 3 Business Combinations. An illustrative balance sheet as at 31 December 2017 showing the financial position of the Group excluding the policy holder assets and liabilities is included as supplementary unaudited information after the Notes to the Accounts. An illustrative cash flow on the same basis has also been provided.

 

Financial Review (continued)

Non recurring costs

Non recurring costs for the year ended 31 December 2017 of £3.8m principally comprise:

·     An exceptional impairment charge of £2.1m following completion of an operating systems review, as was noted in last year's financial statements and subsequently reported.

·     Closure cost provisions of £0.9m relating to the rationalisation of offices during the year.

·     Restructuring costs of £0.6m following acquisitions of businesses in prior years.

During the year ended 31 December 2017 the Group completed the review of its operating systems following the acquisition of the Suffolk Life business in May 2016. As a result the Group concluded that the most cost effective, appropriate and lowest risk solution was, subject to contract, to implement a material upgrade of the existing back office operating system at Curtis Banks whilst retaining the current systems at Suffolk Life. 

As a result of this decision costs of £2.1m incurred and capitalised on the initial development, installation, and evaluation and testing of an alternative system over recent years have now been written off as an exceptional impairment charge in the financial statements for the year ended 31 December 2017. Other than £0.1m, all of these costs were originally incurred in accounting periods up to and including the year to 31 December 2016.

During the year ended 31 December 2017 a review of all the office locations used by the Group was carried out. As a result of that review, and after full consultation with all relevant staff, the decision was taken to close the Group's office in Market Harborough.  The closure was effective from the end of January 2018. Full provision has been made in the financial statements for the year ended 31 December 2017 for all the financial costs arising from the decision to close that office including redundancy payments, amounts due under onerous leases and cost of relocating the activities of that office to other Group locations. The benefits of the decision to close the Market Harborough will be reflected in the current year.

Restructuring costs arose from previous year's acquisitions, principally the acquisition of the business of European Pensions Management Limited in July 2016.

Financial Review (continued)

Systems Development

As noted above, and in the Chief Executive's Report, after a full review the decision has been taken to upgrade the existing systems at Curtis Banks whilst retaining existing systems at Suffolk Life.

The upgrade of the systems at Curtis Banks is expected to commence in H2 2018. Costs associated with this upgrade will be capitalised and amortised in accordance with our normal accounting policy. Amortisation will commence once the upgrade is completed and fully operational.

Employee Benefit Trust

During the year under review the Group set up an offshore Employee Benefit Trust ("EBT") to acquire shares in the Company in the market to satisfy future option and long term incentive awards. The EBT is funded by loans from the Group. As at 31 December 2017 the EBT had acquired 99,155 shares in Curtis Banks Group plc funded by a £250,000 loan from the Group. The financial statements of the EBT are consolidated within the overall Group financial statements and these shares are shown on the balance sheet of the Group as Treasury Shares and are included within total equity.

Earnings per Share

Fully diluted Earnings per Share ("EPS") based on adjusted operating profits have increased by 48% in the year ended 31 December 2017 from 10.37p to 15.38p. On the profit after tax the fully diluted EPS shows a 32% increase in the same period from 7.02p to 9.26p. With the granting of new options in the year ended 31 December 2017 under the various option schemes adopted by the Group diluted EPS is considered to be a more meaningful measure of performance for investors than basic EPS.

Capital requirements

The Group's regulated subsidiary companies submit regular returns to the FCA and the PRA relating to their capital resources.  At 31 December 2017 the total regulatory capital requirement across the Group was £11.4 m and the Group had an aggregate surplus of £13.1m across all regulated entities. In addition to this it is Group internal policy for regulated companies within the Group to hold at least 130% of their required regulatory capital resulting in the aggregate surplus reducing to £9m. All the regulated firms within the Group maintained surplus regulated capital throughout the year.

Paul Tarran

Chief Financial Officer

14 March 2018

Curtis Banks Group PLC

Consolidated statement of comprehensive income

			Year ended 31 December 2017							Year ended 31 December 2016
			Before amortisation and non-recurring costs		Amortisation and non-recurring costs		Total			Before amortisation and non-recurring costs		Amortisation and non-recurring costs		Total
		Notes	£'000		£'000		£'000			£'000		£'000		£'000
Operating revenue				43,573		-	43,573				29,731		-	29,731
Policyholder investment returns		2		343,009		-		343,009			261,639		-		261,639
Revenue				386,582		-	386,582				291,370		-	291,370
Administrative expenses		3		(32,336)		-	(32,336)				(22,403)			(22,403)
Non-participating investment contract expenses			(34,560)		-		(34,560)			(18,268)		-		(18,268)
Changes in provisions: Non-participating investment contract liabilities			(308,449)		-		(308,449)			(243,371)		-		(243,371)
Policyholder total expenses				(343,009)		-	(343,009)				(261,639)		-	(261,639)
Operating profit before amortisation and non-recurring costs				11,237		-		11,237			7,328		-		7,328
Non-recurring costs		4		-		(3,754)		(3,754)			-		(1,690)		(1,690)
Amortisation				-		(1,131)		(1,131)			-		(884)		(884)
Operating profit				11,237		(4,885)	6,352				7,328		(2,574)	4,754
Finance income				67		-		67			117		-		117
Finance costs				(562)		-		(562)			(381)		-		(381)
Profit before tax				10,742		(4,885)		5,857			7,064		(2,574)		4,490
Tax		6		(1,565)		940		(625)			(1,126)		470		(656)
Total comprehensive income for the year				9,177		(3,945)		5,232			5,938		(2,104)		3,834
Attributable to:
Equity holders of the company								5,222							3,829
Non-controlling interests								10							5
								5,232							3,834
Earnings per ordinary share on net profit
Basic (pence)		7					9.75							7.23
Diluted (pence)		7					9.26							7.02

The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.

Curtis Banks Group Plc

Consolidated statement of financial position

 

							Group
			Notes				31-Dec-17 £'000		31-Dec-16 £'000
ASSETS
Non-current assets
Intangible assets			8				44,593		47,442
Investment property			9				1,206,298		1,149,135
Property, plant and equipment			10				1,148		1,073
Investments							2,032,293		1,924,913
Deferred tax asset							124		-
							3,284,456		3,122,563
Current assets
Trade and other receivables							16,687		17,523
Cash and cash equivalents			11				437,849		447,510
Current tax asset							310		-
							454,846		465,033
Total assets							3,739,302		3,587,596
LIABILITIES
Current liabilities
Trade and other payables							12,658		12,138
Deferred income							24,374		21,993
Borrowings			12				29,444		38,329
Provisions							641		-
Deferred consideration							341		641
Current tax liability							-		504
							67,458		73,605
Non-current liabilities
Borrowings			12				64,584		77,194
Provisions							259		-
Deferred consideration							454		821
Non-participating investment contract liabilities							3,561,929		3,394,404
Deferred tax liability							-		42
							3,627,226		3,472,461
Total liabilities							3,694,684		3,546,066
Net assets							44,618		41,530
Equity attributable to owners of the parent
Issued capital							269		268
Share premium							33,451		33,425
Equity share based payments							731		239
Treasury shares							(250)		-
Retained earnings							10,403		7,589
							44,604		41,521
Non-controlling interest							14		9
Total equity							44,618		41,530

Approved by the Board and authorised for issue on 14 March 2018.

Paul Tarran

Chief Financial Officer

Company Registration No. 07934492

Curtis Banks Group Plc

Consolidated statement of changes in equity

 

	Issued capital £'000		Share premium £'000		Equity share based payments £'000		Treasury shares £'000		Retained earnings £'000		Total £'000		Non-controlling interest £'000		Total equity £'000
At 1 January 2016	225		7,146		97		-		6,163		13,631		9		13,640
Total comprehensive income for the year	-		-		-		-		3,829		3,829		5		3,834
Share based payments	-		-		142		-		-		142		-		142
Ordinary shares issued	43		26,279		-		-		-		26,322		-		26,322
Ordinary dividends declared and paid	-		-		-		-		(2,403)		(2,403)		(5)		(2,408)
At 31 December 2016	268		33,425		239		-		7,589		41,521		9		41,530
Total comprehensive income for the year	-		-		-		-		5,222		5,222		10		5,232
Share based payments	-		-		492		-		-		492		-		492
Ordinary shares bought by EBT	-		-		-		(250)		-		(250)		-		(250)
Ordinary shares issued	1		26		-		-		-		27		-		27
Ordinary dividends declared and paid	-		-		-		-		(2,408)		(2,408)		(5)		(2,413)
At 31 December 2017	269		33,451		731		(250)		10,403		44,604		14		44,618

Curtis Banks Plc

Consolidated statement of cash flows

							Group
							Year ended 31 December
							2017       £'000		2016 £'000
Cash flows from operating activities
Profit before tax							5,857		4,490
Adjustments for:
Depreciation							570		519
Amortisation and impairments							3,126		884
Interest expense							554		387
Share based payment expense							492		142
Fair value gains on financial investments							(156,046)		(199,681)
Additions of financial investments							(493,638)		(328,511)
Disposals of financial investments							542,304		390,603
Fair value gains on investment properties							(44,074)		25,038
Increase in liability for investment contracts							167,525		156,175
Changes in working capital:
Decrease/(increase) in trade and other receivables							(433)		(6,447)
Increase in trade and other payables							4,193		11,024
Taxes paid							(999)		(667)
Net cash flows received from operating activities							29,431		53,956
Cash flows from investing activities
Purchase of intangible assets							(277)		(1,533)
Purchase of property, plant and equipment							(161,923)		(101,473)
Investment in employee benefit trust							(250)		-
Receipts from sale of property, plant and equipment							148,191		85,758
Net cash flows from acquisitions							(669)		357,821
Net cash flows (used in)/received from investing activities							(14,928)		340,573
Cash flows from financing activities
Equity dividends paid							(2,413)		(2,408)
Net proceeds from issue of ordinary shares							27		26,322
Net increase/(decrease) in borrowings							(21,274)		21,848
Interest paid							(504)		(411)
Net cash (used in)/received from financing activities							(24,164)		45,351
Net (decrease)/increase in cash and cash equivalents							(9,661)		439,880
Cash and cash equivalents at the beginning of the year							447,510		7,630
Cash and cash equivalents at the end of the year							437,849		447,510

The Group's Consolidated Statement of Cash Flows includes all cash and cash equivalent flows, including £412,175,567 (2016: £426,054,538) relating to policyholder non-participating investment contracts.

1              Corporate information

Curtis Banks Group PLC ("the Company") is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange PLC.  The financial statements are presented in pounds sterling, with all values rounded to the nearest thousand pounds except when otherwise indicated. The financial statements were authorised for issue in accordance with a resolution of the Directors on 14 March 2018.

The principal activity of the Group is that of the provision of pension administration services principally for Self Invested Personal Pension schemes ("SIPPs") and Small Self-Administered Pension schemes ("SSASs").  The Group is staffed by experienced professionals who all have proven track records in this sector.

As a result of the acquisition of Suffolk Life in 2016, Suffolk Life Annuities Limited became a wholly owned subsidiary of the Group. This company is an insurance company that writes SIPP Products as insurance contracts. These are all non-participating insurance policy contracts and so the Group does not bear any insurance risk. As the policyholder assets and liabilities are shown on the balance sheet of Suffolk Life Annuities Limited, these will also show on the Group balance sheet on consolidation. As the policies are non-participating contracts, the Client related assets and liabilities in Suffolk Life Annuities match. In addition the revenues, expenses and investment returns of the non-participating insurance policy contracts are shown in the consolidated statement of comprehensive income. Again, these income, expense items and investment returns due to the policy holders equal each other. Note 15 and 16 to this Announcement shows for illustrative purposes the Group Balance Sheet and cash flows excluding policy holder assets and liabilities.

2              Revenue

Revenue is wholly derived from activities undertaken within the United Kingdom and comprises the following categories:

		Year ended 31 December
				2017 £'000		2016 £'000
Fees				34,073		25,214
Interest income				9,500		4,517
Policyholder investment returns				343,009		261,639
				386,582		291,370

3             Profit for the year

Profit for the year is arrived at after:

		Year ended 31 December
				2017 £'000		2016 £'000
Charging:
Amortisation of intangible assets				1,131		884
Depreciation of property, plant and equipment				570		519
Auditors remuneration:
- audit of the financial statements of the Group				177		162
- audit of the financial statements of the Company				29		24
- audit related assurance services				97		110

4             Non-recurring costs

Non-recurring costs include the following significant items:

		Year ended 31 December
				2017 £'000		2016 £'000
Set up costs associated with the take on of SIPPs				20		50
Exceptional legal fees				67		537
Redundancy & restructuring costs following acquisitions				1,143		310
Suffolk Life acquisition costs				72		735
European Pension Management acquisition costs				328		58
Exceptional impairment charge				2,124		-
				3,754		1,690

Redundancy & restructuring costs following acquisitions

During the year ended 31 December 2017 a full strategic review of all the office locations used by the Group was carried out. As a result of that review, and after full consultation with all relevant staff, the decision was taken to close the Group's office in Market Harborough.  The closure was effective from the end of January 2018. Full provision has been made in the financial statements for the year ended 31 December 2017 for all the financial costs arising from the decision to close that office including redundancy payments, amounts due under onerous leases and cost of relocating the activities of that office to other Group locations. 

Exceptional impairment charge

During the year ended 31 December 2017 the Group continued and completed the review if its operating systems following the acquisition of the Suffolk Life business in May 2016. As a result of this review the Group concluded that the most cost effective, appropriate and lowest risk solution was, subject to contract, to implement a material upgrade of the existing back office operating system at the Group.  

As a result of this decision, costs of approximately £2.1 million incurred and capitalised on the initial development, installation, evaluation and testing of an alternative system over recent years have now been written off as an exceptional impairment charge in the financial statements for the year ended 31 December 2017. Other than £0.1m, all of these costs were originally incurred in accounting periods up to and including the year to 31 December 2016.

Exceptional legal fees

During the year ended 31 December 2016 the Group entered into an agreement to settle a potential legal claim by another business. The terms of settlement are confidential however no further costs are expected and the total cost included above includes all associated legal fees incurred.

Suffolk Life acquisition costs

The Group incurred a significant level of legal and professional fees in connection with the acquisition of Suffolk Life Group Limited and its subsidiaries during the year ended 31 December 2016. In accordance with IFRS 3 Business Combinations, these have been expensed and treated as non-recurring costs.

European Pension Management acquisition costs

The Group incurred considerable legal and professional fees in connection with the acquisition of the trade and assets of European Pension Management Limited during the year ended 31 December 2016. In accordance with IFRS 3 Business Combinations, these have been expensed and treated as non-recurring costs.

5              Directors and employees

	Year ended 31 December
			2017 £'000		2016 £'000
Wages and salaries			17,585		12,930
Social security costs			1,630		1,275
Other pension costs			1,337		900
Share-based incentive awards			492		142
			21,044		15,247
The average number of employees during the year was:			2017		2016
Directors			7		6
Administration			571		452
			578		458
Details of emoluments paid to the directors and key management personnel are as follows:
	Year ended 31 December
			2017 £'000		2016 £'000
Total emoluments paid to:
Directors
Wages and salaries			1,411		787
Social security costs			123		95
Post-employment costs			21		21
Key management personnel
Wages and salaries			806		1,021
Social security costs			93		126
Post-employment costs			47		49
			2,501		2,099
Emoluments of highest paid director
Wages and salaries			468		258
Pension Contributions			8		8
			476		266

6            Taxation               

	Year ended 31 December
			2017 £'000		2016 £'000
Domestic current period tax
UK Corporation tax			791		601
Deferred tax
Origination and reversal of temporary differences			(166)		55
			625		656
Factors affecting the tax charge for the period
Profit before tax			5,857		4,490
Profit before tax multiplied by standard rate of UK Corporation tax of 19.25% (2016: 20.00%)			1,127		898
Effects of:
Adjustment to prior period			(305)		(234)
Non-deductible expenses			13		58
Other tax adjustments			(210)		(66)
			(502)		(242)
Current tax charge			625		656

7              Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Changes in income or expense that would result from the conversion of the dilutive potential ordinary shares are deemed to be trivial, and therefore no separate diluted net profit is presented.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

			2017 £'000		2016 £'000
Net profit and diluted net profit available to equity holders of the Group			5,222		3,829
Net profit and diluted net profit before non-recurring costs (note 6) and amortisation (note 5) available to equity holders of the Group.			10,742		7,064
Weighted average number of ordinary shares:			Number		Number
Issued ordinary shares at start of the year			53,599,669		44,954,769
Effect of shares issued in the current year			25,127		8,031,907
Basic weighted average number of shares			53,624,796		52,986,676
Effect of options exercisable at the reporting date			800,000		533,333
Effect of options not yet exercisable at the reporting date			2,044,484		991,959
Diluted weighted average number of shares			56,469,280		54,511,968
			Pence		Pence
Earnings per share:
Basic			9.75		7.23
Diluted			9.26		7.02
Earnings per share on net profit before non-recurring costs and amortisation, less an effective tax rate:					As restated*
Basic			16.20		10.67
Diluted			15.38		10.37

*The effective tax rate used in previous years was calculated using the formula "current tax charge / profit before tax". In order to reduce the impact of accounting measures such as deferred tax, and the timing of tax reliefs, the effective tax rate has been changed to match the current tax rate applicable to the accounting year. The current tax rate applicable for the year ended 31 December 2017 was 19.25% (2016: 20.00%).

8              Intangible assets

Group

		Goodwill £'000		Client Portfolios £'000		Computer Software £'000		Total £'000
Cost
At 1 January 2017		28,903		18,430		3,116		50,449
Additions		-		5		272		277
Disposals		-		(2)		(1,993)		(1,995)
At 31 December 2017		28,903		18,433		1,395		48,731
Amortisation
At 1 January 2017		-		2,533		474		3,007
Charge for the year		-		922		209		1,131
Disposals		-		-		-		-
At 31 December 2017		-		3,455		683		4,138
Net book value
At 31 December 2016		28,903		15,897		2,642		47,442
At 31 December 2017		28,903		14,978		712		44,593

Goodwill

Goodwill arose on the acquisition of Suffolk Life Group Limited and its subsidiaries on 25 May 2016. The Group tests goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired.  The recoverable amount of goodwill has been determined based on value-in-use calculations using a discount rate appropriate to the risk profile of the asset. These calculations use operating cash flow projections based on financial budgets approved by management covering a three year period, assuming business then continues onwards after this period at a steady rate for the purpose of the analysis.

Computer Software

Computer software contains costs that meet the recognition criteria under IAS 38 as Intangible Assets. General small computer software costs are amortised over their useful economic life of four years on a straight-line basis. Computer software costs for significant projects are amortised over an estimated UEL on a project by project basis.

Following completion of a review of a potential new operating system, and the resultant decision  to retain and upgrade the existing system, intangible costs of approximately £2 million incurred and capitalised on the initial development, installation, evaluation and testing of an alternative operating system over recent years have been written off during the year ended 31 December 2017.

Client Portfolios

Client portfolios represent individual client portfolios acquired through business combinations and accounted for under the acquisition method. The directors consider that there is no impairment to assets as at the year end. The client portfolios are being amortised over a period of 20 years.

The brought forward balance relates to the purchase by Curtis Banks Limited, a subsidiary company, of the trade and assets of Montpelier Pension Administration Services Limited on 13 May 2011, the full SIPP business of Alliance Trust Savings Limited on 18 January 2013, the full SIPP business and certain assets of Pointon York SIPP Solutions Limited on 31 October 2014, the full SIPP business of Rathbones Pension & Advisory Services Limited on 31 December 2014, and a book of full SIPPs from Friends Life plc (now Aviva plc) on 13 March 2015.

The brought forward balance also includes the purchase by Suffolk Life Pensions Limited, a subsidiary company, of the trade and assets of European Pensions Management Limited on 14 July 2016, and books of SIPPs purchased from Pointon York SIPP Solutions Limited on 9 November 2012, Pearson Jones PLC on 30 April 2013, and Origen Investment Services Limited on 22 May 2013.

All acquisitions have been accounted for under the acquisition method of accounting. 

The directors have considered the carrying value of the client portfolios and have concluded that no impairment is required.  The client portfolios are being amortised over a period of 20 years and have an average remaining expected useful economic life as at 31 December 2017 of 16 years and 4 months.

9              Investment Property

Assets held at fair value

Group

					Investment Properties		Total
					£'000		£'000
Fair value
At 1 January 2017					1,149,135		1,149,135
Arising on acquisitions					-		-
Additions					161,280		161,280
Disposals					(148,191)		(148,191)
Fair value gains					44,074		44,074
At 31 December 2017					1,206,298		1,206,298

All investment properties have been valued at the year end by reference to most recent professional valuations and this is further adjusted by applying the corresponding property index available. Investment properties held to cover the linked policyholder business are included in non-participating investment contract liabilities.

10           Property, plant and equipment

Assets held at cost

Group

	Leasehold Improvements		Computer equipment		Office equipment, fixtures & fittings		Total
	£'000		£'000		£'000		£'000
Cost
At 1 January 2017	54		3,606		1,093		4,753
Additions	-		520		125		645
Disposals	-		(42)		-		(42)
At 31 December 2017	54		4,084		1,218		5,356
Depreciation
At 1 January 2017	28		2,697		955		3,680
Charge for the year	13		493		64		570
Disposals	-		(42)		-		(42)
At 31 December 2017	41		3,148		1,019		4,208
Carrying value
At 31 December 2016	26		909		138		1,073
At 31 December 2017	13		936		199		1,148

11           Cash and cash equivalents

As at 31 December 2017 and 2016 cash and cash equivalents were as follows:

	Group			Company
	As at 31 December			As at 31 December
	2017 £'000		2016 £'000		2017 £'000		2016 £'000
Cash at bank and in hand	437,849		447,510		2,318		458

All cash at bank is held on overnight deposit. Cash at bank and in hand includes £48,000 (2016: £1,634,000) of cash equivalents held at fair value.

12           Borrowings

		Group			Company
		As at 31 December			As at 31 December
		2017 £'000		2016 £'000		2017 £'000		2016 £'000
Current
Bank loans		29,444		38,329		3,158		3,108
		29,444		38,329		3,158		3,108
Non-current
Bank loans		64,584		77,194		14,508		17,667
		64,584		77,194		14,508		17,667
Total borrowings		94,028		115,523		17,666		20,775

Bank borrowings

The bank borrowings are repayable as follows:

	Group				Company
	As at 31 December				As at 31 December
		2017 £'000		2016 £'000		2017 £'000		2016 £'000
Within 1 year		29,444		38,329		3,158		3,108
Between 1 year and 5 years		44,158		51,922		14,508		17,667
After more than 5 years		20,426		25,272		-		-
		94,028		115,523		17,666		20,775

Bank borrowings of the Company mature between December 2018 and December 2021 and bear average coupons of 2.25% plus LIBOR per annum.

Total borrowings include liabilities of £76,464,000 (2016: £94,580,000) secured by legal charge over certain properties held within non-participating investment contracts, and liabilities of £17,666,000 (2016: £20,775,000) secured on the shares of Curtis Banks Limited, Suffolk Life Pensions Limited and Suffolk Life Annuities Limited.

13           Dividends

		Year to 31 December
				2017		2016
				£'000		£'000
Ordinary interim declared and paid				2,408		2,403
				2,408		2,403

A second interim share dividend in respect of 2016 was declared and paid on 12 May 2017 of 3p per ordinary share.

An interim share dividend was declared and paid on 15 November 2017 of 1.5p per ordinary share.

14           Contingent liabilities

The Group has been in correspondence with HMRC regarding processes and documentation in respect of in specie contributions. HMRC have alleged that incorrect procedures were followed and is seeking to reclaim tax reliefs granted and interest thereon. This is an industry wide issue affecting other SIPP operators and is being challenged by the industry as a whole. It is not possible to determine when this matter will be resolved and the outcome and impact are not known at this stage. We do not believe that the net exposure arising from this will be material to the Group.

15. Illustrative IFRS Consolidated Statement of Financial Position as at 31 December 2017 split between insurance policy holders and the Group's shareholders

ASSETS					£'000		£'000		£'000
					Group Total		Policyholder		Shareholder
Non-current assets
Intangible assets					44,593		-		44,593
Investment property					1,206,298		1,206,258		40
Property, plant and equipment					1,148		-		1,148
Investments					2,032,293		2,032,293		-
Deferred tax asset					124		-		124
					3,284,456		3,238,551		45,905
Current assets
Trade and other receivables					16,687		7,855		8,832
Cash and cash equivalents					437,849		412,176		25,673
Current tax asset					605		605		-
					455,141		420,636		34,505
Total assets					3,739,597		3,659,187		80,410
LIABILITIES
Current liabilities
Trade and other payables					12,658		7,348		5,310
Deferred income					24,374		13,446		10,928
Borrowings					29,444		26,286		3,158
Restructuring provision					534		-		534
Onerous lease provision					107		-		107
Deferred consideration					341		-		341
Current tax liability					295		-		295
					67,753		47,080		20,673
Non-current liabilities
Borrowings					64,584		50,178		14,406
Onerous lease provision					259		-		259
Deferred consideration					454		-		454
Non-participating investment contract liabilities					3,561,929		3,561,929		-
					3,627,226		3,612,107		15,119
Total liabilities					3,694,979		3,659,187		35,792
Net assets					44,618		-		44,618
Equity attributable to owners of the parent
Issued capital					269		-		269
Share premium					33,451		-		33,451
Equity share based payments					731		-		731
Treasury shares					(250)		-		(250)
Retained earnings					10,403		-		10,403
					44,604		-		44,604
Non-controlling interest					14		-		14
Total equity					44,618		-		44,618

16. Illustrative IFRS Consolidated Statement of Cash Flows as at 31 December 2017 split between insurance policy holders and the Group's shareholders

				£'000 Group Total		£'000 Policyholder		£'000 Shareholder
Cash flows from operating activities
Profit before tax				5,857		-		5,857
Adjustments for:
Depreciation				570		-		570
Amortisation and impairments				3,126		-		3,126
Interest expense				554		-		554
Share based payment expense				492		-		492
Fair value gains on financial investments				(156,046)		(156,046)		-
Additions of financial investments				(493,638)		(493,638)		-
Disposals of financial investments				542,304		542,304		-
Fair value gains on investment properties				(44,074)		(44,074)		-
Increase in liability for investment  contracts				167,525		167,525		-
Changes in working capital:
Decrease/(increase) in trade and other receivables				(433)		(314)		(122)
Increase in trade and other payables				4,193		1,567		2,629
Taxes paid				(999)		-		(999)
Net cash flows from operating activities				29,431		17,324		12,107
Cash flows from investing activities
Purchase of intangible assets				(277)		-		(277)
Purchase of property, plant & equipment				(161,923)		(161,278)		(645)
Investment in employee benefit trust				(250)		-		(250)
Receipts from sale of property, plant & equipment				148,191		148,191		-
Net cash flows from acquisitions				(669)		-		(669)
Net cash flows from investing activities				(14,928)		(13,087)		(1,841)
Cash flows from financing activities
Equity dividends paid				(2,413)		-		(2,413)
Net proceeds from issue of ordinary shares				27		-		27
Net decrease in borrowings				(21,274)		(18,116)		(3,158)
Interest paid				(504)		-		(504)
Net cash flows from financing activities				(24,164)		(18,116)		(6,048)
Net increase/(decrease) in cash and cash equivalents				(9,661)		(13,879)		4,218
Cash and cash equivalents at the beginning of the year				447,510		426,055		21,455
Cash and cash equivalents at the end of the year				437,849		412,176		25,673

 

END

 

 

FR SFEEELFASEED